The Interest Rate on Long-Term Bonds Is Somewhat Higher Than

question 17

Multiple Choice

The interest rate on long-term bonds is somewhat higher than suggested by the expectations theory because

• A)the expectations theory doesn't account for taxes.
• B)a risk premium exists.
• C)an inflation premium must be added to long-term bonds.
• D)the Fed can only control short-term interest rates.

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Definitions:

Sensory Input

Information received by the senses (sight, sound, smell, taste, and touch) that is then sent to the brain for processing.

Primary Motor Cortex

A section of the cerebral cortex tasked with the planning, control, and initiation of voluntary movements.

Primary Somatosensory Cortex

The primary area of the brain responsible for processing somatic sensations, such as touch, temperature, pain, and proprioception.

Homunculus

Representation of the human body in the sensory or motor cortex; also any topographical representation of the body by a neural area.